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TMI Blog2003 (8) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer whether it be by or through an executing or insolvency court. A firm, Gurcharan Singh Sethi and Sons, owed its dues to respondent No. 1, Commissioner of Income-tax, and the property was attached by the said respondent for recovery of income-tax arrears and an open auction was announced for the said plot No. A-35 measuring 5,300 sq. yds. by the Tax Recovery Officer with the auction scheduled for September 18, 1981. The said advertisement is as under: "Golden opportunity Public auction Industrial plot No. A-35 at Mohan Co-operative Industrial Estate, New Delhi, measuring about 5,300 sq. yards. Under instructions from the Tax Recovery Officer XX, Vikas Bhawan, New Delhi, the abovementioned property owned by Sh. Gurcharan Singh Sethi, Rio 47, Hanuman Road, New Delhi, P/o Gulab Singh Sethi and Sons, New Delhi, attached for the realisation of income-tax dues from Gulab Singh Sethi and Sons, 53, Najafgarh Road, New Delhi-IS will be offered for sale by public auction at site at 11-30 a.m. On Friday, 18th September, 1981 at 11-30 a.m. at site. Brief conditions of sale: 1. The sale is subject to conditions prescribed in Second Schedule to the Income-tax Act, 1961, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 24, 1977, forwarded by the Income-tax Officer, Special Circle-VIII, New Delhi, for recovery of arrears from Gulab Singh Sethi and Sons, 53, Najafgarh Road, New Delhi, and that the said sale has been duly confirmed by the T. R. O.-XX, and became absolute on the 19th day of October, 1981. Specification of property : A-35, Mohan Co-operative Industrial Estate, Mathura Road, New Delhi. Given under my hand and seal at 30th day of January, 1982. (Sd.) S. N. Balconi, Tax Recovery Officer-XX, New Delhi." A reading of the aforesaid certificate, thus, shows that though the original order of confirmation showed Shri R. K. Dhingra as the successful bidder on behalf of R. K. Enterprises, the certificate of sale was finally issued in favour of Shri R. K. Dhingra (HUF) and other members of the Hindu undivided family as stated in the certificate (hereinafter referred to as, "the purchasers"). Shri R. K. Dhingra addressed a letter dated January 27, 1983, to the Tax Recovery Officer requesting for necessary documents since the sale certificate had still not been registered in the absence of the same. It appears that, for one reason or the other, the sale certificate was not registered for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mined in detail and it is concluded that since the burden of covenant runs with the land, therefore, the present sub-lessee is liable to pay the amount of unearned increase. The present sub-lessee has come forward for transfer of the sub-lease hold rights in his name, which can be allowed only on payment of the unearned increase. You are, therefore, requested to arrange the payment of the unearned increase along with interest at 18 per cent. per annum either through the department or the present sublessee, so that the case can be settled once for all." There was, however, no solution to the problem at hand and the purchasers served a legal notice dated July 25, 1995, on respondent No. 1. Thereafter, the petitioner approached the permanent Lok Adalat of respondent No. 2-DDA and the matter was taken up by the Lok Adalat. The order-sheet of the Lok Adalat has also been annexed to the writ petition. The DDA, however, took the stand that it has to recover the unearned increase and was not concerned with the matter between the Tax Department and the purchasers. The only concession made was that the interest rate was reduced from 18 per cent. to 12.5 per cent. The Lok Adalat also notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income-tax authorities and the sale was made by the President of India who is also the perpetual lessor of the plot. A reference has also been made to the fact that the petitioner has not been able to construct on the property and, on the one hand, the property was not being mutated in the name of the petitioner, while, on the other hand, respondent No.2 had issued a public notice that if the construction was not completed on the plots including the plot in question by June 30, 2001, the said respondent would proceed to cancel the plot. The construction cannot be raised till no objection certificate is issued by respondent No. 2-DDA for sanction of the plans and the said no objection certificate has not been issued on account of non-mutation in the name of the petitioner. In the counter affidavit filed by respondent No. 2-DDA, reliance has been placed on the terms and conditions of the perpetual sub-lease deed. It has, thus, been stated that the unearned increase is liable to be paid in terms of clause II(6) and even in such cases as the present case where the property is sold in pursuance to the attachment carried out by the tax authorities, there is no exemption from payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Puran Singh Sethi, directly. It was' further informed that since it was an involuntary sale, having not been made by the sub-lessee but by the Tax Recovery Officer by a public auction, as per the provisions of Part III of the Second Schedule to the Income-tax Act, 1961-for recovering the outstanding dues covered by the Recovery Officer Certificate and further as the L and DO as one of the interested parties to the property did not make any application under rule 60 of I. T. C. P. Rules for setting aside the impugned sale so made by the Tax Recovery Officer as also keeping in view the indemnity bond filed by the defaulter, Para III of clause (7) of your lease deed in this case is not applicable. In view of these circumstances, you are once again requested to settle your claim of unearned increase directly with the sub-lessee." Learned counsel for the petitioner has more or less made the same submissions as set out in the writ petition. Learned counsel has further relied upon a Division Bench judgment of this court in Bansal Contractors (India) Ltd. v. Union of India [2000] 241 ITR 97. In the said case, the property was compulsorily acquired by the appropriate authority under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property. It may, however, be noticed that the petitioner has been communicating with the tax authorities and managing director of the company is Shri Raj Kumar Dhingra, who had initially participated in the auction on behalf of R. K. Enterprises, though subsequently the sale certificate was issued in the name of five persons with one-fifth share each including Shri R. K. Dhingra (HUF). This aspect, in my considered view, is not really material in view of the submission recorded on the initial date of hearing itself that without going into the question of the successor entities, the transfer be made in the name of five persons in whose favour the sale certificate was issued. Learned counsel for respondent No.1 contends that the present case is not one of compulsory acquisition of property under section 269UD of the said Act, but of attachment of the property for realisation of tax dues and Schedule II to the said Act would apply, which contains the rules relevant in this behalf. Learned counsel referred to rule 6 of the said Schedule, which describes the purchaser's title and, thus, what was vested in the purchasers was only the rights of the defaulter at the time of the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the clarification having been received from the DDA that no unearned increase was payable in terms of the lease deed in view of the transaction being a case of first sale. It is, thus, the contention of learned counsel for respondent No.1 that the liability towards unearned increase can be either of the petitioner or the DDA should recover the same from the original perpetual lessee, but respondent No.1 cannot be burdened with this liability as it only stepped into the shoes of the original sub-lessee when it attached the property and issued the proclamation of sale. I have considered the submissions advanced by learned counsel for the parties. In order to appreciate the rival contentions, the most important document is the conditions of auction. This is so as the factual matrix is not disputed to the extent that the property in question was attached under the provisions of the said Act for realization of the income-tax dues of the sub-lessee. The public auction notice states that the property has been attached and specifies the conditions of sale. Condition 5 provides that transfer will be made by sale certificate to the auction purchaser whose bid is accepted. The transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the purchasers since once the property vests in the Government, the subsequent purchasers cannot be subjected to the liabilities de hors the terms of the sale deed. In the present case also, even the sale certificate issued does not mention any liability towards the unearned increase and rightly so, since that was not a condition of the auction. Thus, there can be no question of burdening the petitioner with the said liability. As far as the plea of learned counsel for respondent No.1 based on the rules contained in Schedule II of the said Act is concerned, rule 6 provides that the property sold shall vest in the purchaser and that where the property is sold in execution of a certificate, the same shall vest in the purchaser merely the right, title and interest of the defaulter at the time of sale, even though the property itself be specified. The plea is that it is not all rights, which have been transferred to the purchasers, but only such rights as were vested in the defaulter. Thus, it is the rights conferred on the sub-lessee, which have been sold to the purchasers. This has to be appreciated keeping in mind the plea of respondent No.1 that respondent No.1 while attachi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for respondent No.1 is concerned, that the obligation to pay should not be affixed on the said respondent, but on the sub-lessee, this is a matter to be sorted out inter se the respondents. In view of the demand of unearned increase by respondent No. 2-DDA, it was for respondent No.1 to take out appropriate proceedings to challenge the decision and the matter to be decided and/or adjudicated between respondents Nos. 1 and 2 for which the petitioner cannot be made to suffer. If respondent No.1 was aggrieved by the decision of respondent No. 2-DDA to levy unearned increase, it was always open for respondent No.1 to impugn the same in accordance with law. In view of the aforesaid, I consider it appropriate that respondent No.1 shall deposit the amount of unearned increase of Rs. 6,12,852.04 with respondent No.2 within a period of six weeks from today without prejudice to the rights of respondent No.1 to impugn the same in accordance with law against respondent No.2. Respondent No.2 will also have a right to claim interest on the unearned increase from respondent No.1, in case so advised, by initiating appropriate legal proceedings. The case of the purchasers will be processe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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